As the world watches Ukraine, local employer Teck is monitoring global events with the potential to move to price of coal.
With more sanctions placed on Russia for invading Ukraine, coal prices have jumped. Russia is a major exporter of thermal and metallurgical coal to Europe.
According to a release from Wood Mackenzie, a global commodities consultancy, sanctions focused on coal could result in a further ‘price shock’ for coal.
“The primary issue with replacing Russian coal exports in Europe is its reliance on Russia’s particular quality of coal,” reads the report.
While Europe is yet to formally target coal in sanctions against Russia, instead focusing on the financial sector, they have agreed to ‘phase out’ reliance on Russian fossil fuels with no end date. The primary focus of the phase-out is on gas, which Europe is heavily reliant on.
The United States however, included coal in sweeping bans on Russian imports announced on Mar. 8 under an executive order. The ban also prevents American companies from investing in Russian commodity projects.
According to Russian state media sources, Russia produced over 430 million tonnes of coal in 2021. Ukraine is also a major producer of coal, but production there has been dogged by conflict in the Donbas region since 2014.
Teck has already noted a higher coal price in it’s Q4 report for 2021, which resulted in major gains for the company, with coal accounting for a massive share of company profits. In Q4 2021, steel-making coal averaged $441 per tonne. Higher prices through 2021 were due to increased demand, and ongoing tensions between China (a major importer of coal) and Australia (a major exporter, and competitor for Canadian coal).
The coal division accounted for $1.4 billion in profits for 2021, according to the Q4 report released last month.
Looking forward, production guidances for Teck remain unchanged, at between 24.5 million and 25.5 million tonnes for 2022.
READ MORE: Teck reports $1.4 billion jump in quarterly profits from coal division
scott.tibballs@thefreepress.ca
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